Originally posted 2008-12-12 09:21:00.
If you have spent significant time in the construction business, you have encountered instances where (i) your construction contract has been breached, (ii) you have not been paid, and (iii) you need to file a mechanic’s lien. Some basic business practices, however, will help ensure that your lien rights are maximized and your claim preserved. Consider these points:
The best way to avoid contractual pitfalls is to consult with an attorney knowledgeable in the construction field to assist you in drafting a contract that fits your particular area of the industry and protects your rights. Once your contracts are properly drafted, the enforcement of your lien rights becomes an uncomplicated task.
The Virginia mechanic’s lien statute allows a contractor to file a lien only for unpaid amounts accrued within 150 days of either the date of the lien or the last day of work performed on the project, whichever is earlier. The simplest and most effective way to avoid losing valuable receivables is to apply payments to the oldest invoice first, thus pushing the receivables closer to the end of the project.
Notify any mechanic’s lien agent listed on the building permit and send collection letters at 30, 60 and 90 days from the time you are owed the money. The mechanic’s lien statute requires that you file any memorandum of lien within 90 days of the last day of the last month (though it is often best to just calculate 90 days from your last work) in which you performed work or provided materials. Having a 30-60-90 day system will act as a set of reminders to keep you from missing this important deadline.
Mechanic’s liens can be expensive to enforce. Regardless of the amount of the lien, enforcement involves a circuit court lawsuit against all parties who have an interest in the property on which your construction was performed.
Remember also that a lien is not the sole remedy– a simple breach of contract suit, alone or in concert with the filing of a mechanic’s lien memorandum, may be enough to force payment. The process need not be scary so long as you enter into well drafted contracts, use proper office business procedures, and consult with an attorney experienced in the filing and enforcement of mechanic’s liens to determine the best course of action.
These are just the basics. Remember that your case is unique and the facts can and will change the general considerations.
UPDATE: On July 1, 2013 your mechanic’s lien form will need to be updated.
Please join the conversation with a comment below. Also, please subscribe to keep up with the latest Construction Law Musings.